ZyFin Research's Business Cycle Indicator (BCI) indicates that the Index of Industrial Production (IIP) will expand for the sixth consecutive month in October 2014, official data for which would be only available in December 2014. The BCI is a lead indicator to IIP final estimates, and the September reading (corresponding to IIP trend in October) is at 8.4% (year-on-year [YoY]), up from 8.1% in the previous month.  The BCI's advance estimate of the IIP trend has a success rate of more than 70%.

The uptrend in BCI indicates that the manufacturing sector would continue to expand. With the monsoon recording a deficit of just 12% of the long-term average, food inflation risks have abetted significantly. Furthermore, data for the eight core sector industries for August indicates a strong YoY growth of 5.8%, riding on the expansion in production of coal, steel, cement and electricity in the economy. Globally, the US economy is showing signs of recovery, with employment data reflecting improving labour market conditions.

Giving his views on the September number, Debopam Chaudhuri, chief economist, ZyFin Research, said, ''Although the initial estimates for the IIP in August were disappointing, recent data trends, such as production of intermediate goods, port activity, and export statistics, signal a definite recovery in India’s business cycle. Also, consumer confidence is at a two-year high, reflecting a better Diwali season for retailers, which should go a long way in restoring growth.''